GameStop shares soar as ‘Roaring Kitty’ revitalises meme stock frenzy

London - GameStop shares surged on May 13 as speculation swirled around a return to social media by Mr Keith Gill, who drove the meme-stock mania of 2021 under the moniker Roaring Kitty.

The account’s post on social media platform X shows a man leaning forward with what looks like a gaming controller, which some traders interpreted to mean that Mr Gill is coming back into action.

Mr Gill, whose account has long been dormant, shot to fame in 2021 by rallying day traders on Reddit in an effort to squeeze GameStop short-sellers.

The post had attracted more than 12 million views in the hours since its publication. Mr Gill posted on X again at 11am New York time, this time a short video clip stating: “Fine, I’ll do it myself.”

The reaction to Mr Gill’s initial post shows shades of the original 2021 mania, with chatter across Reddit’s WallStreetBets and activity on StockTwits sparking a rush of retail trader buying.

“That he is able to generate a crowd says that the crowd is back to feeling Fomo (fear of missing out)  and Yolo (you only live once) in an enormous way,” said Mr Peter Atwater, president of Financial Insyghts and an adjunct professor at William and Mary and the University of Delaware.

“When people dive into things that are of pure speculative value, their confidence is extremely high, and this is one of the ways that it manifests.”

More than 175 million shares changed hands, almost 30 times the one-year average. Trading was halted for volatility nine times within the opening 90 minutes of trading. Shares rose as much as 119 per cent on May 13. They closed higher by 74 per cent at US$30.45.

GameStop ripped off a three-week rally in the lead up to May 13’s pop, its longest such winning streak in 2024 as shares soared 68 per cent over that stretch as at May 10’s close.

The stock famously soared more than 2,000 per cent in early 2021, bringing the meme-stock frenzy into the broader public consciousness.

Roaring Kitty had helped draw attention to the stock’s eye-popping short-interest ratio – some 140 per cent of available shares were sold short – as investors bet on the entrepreneur-turned-retail trading icon Ryan Cohen.

Mr Cohen, the video game retailer’s largest shareholder who has a cult-like following among individual investors, built out a stake through early 2021 and pushed to essentially take over the company as retail traders cheered him on.

While Mr Gill and Mr Cohen have been cast as icons among the hoards of retail traders who praise the duo, many who were late to the initial mania were left holding an almost empty bag.

Shares have lost nearly three-quarters of their value from a January 2021 peak when so-called Reddit Raiders flocked to the stock. It would need to more than quadruple from May 13’s levels to recoup all of their losses.

It is worth noting that the percentage of shares available for trading sold short has stayed at roughly 24 per cent, according to financial analytics firm S3 Partners. That is elevated for a typical company, but nowhere near the levels that preceded the 2021 mania.

With no clear catalyst driving the recent gains, GameStop’s move has again seen retail investors make up the bulk of demand. Inflows through the last week totalled US$12 million (S$16 million), according to Mr Giacomo Pierantoni, head of data at Vanda Research.

“These surges in retail activity have served as contrarian signals, prompting institutional investors to quickly short the stock following these rallies driven by retail investors,” Mr Pierantoni added.

GameStop is expected to report quarterly results in June before an annual shareholder meeting.

The majority of Wall Street has avoided covering the stock in recent years, and just three analysts cover it – with two advising clients to sell and only one assigning a hold rating as no one suggests buying the stock, according to data compiled by Bloomberg.

Analysts have long warned that GameStop is detached from fundamental values, as it carries a US$9.3 billion market capitalisation.

The company reported just US$6.7 million in net income for 2023, meaning it trades at a price-to-earnings multiple of more than 1,000. For reference, that is more than 10 times market darling Nvidia’s multiple of roughly 74.

“I don’t think they have the numbers to keep this up, nor do I think the shorts have the resolve shown by Gabe Plotkin three years ago, so likely this fizzles as the fundamentals continue to deteriorate,” said Wedbush’s Mr Michael Pachter, one of GameStop’s most vocal sceptics.

What is more, the lack of a clear strategy has befuddled the few analysts that cover the company. It also has not taken questions on an earnings call since Mr Cohen started to shake up the company.

“Game sales are flattish, hardware sales are down, and the shift to digital downloads continues, so it’s highly unlikely GameStop can stop shrinking,” Mr Pachter said.

Meanwhile, AMC Entertainment Holdings – another stock favoured by retail traders – jumped as much as 102 per cent on May 13. The stock is down more than 99 per cent since its 2021 peak, while GameStop shares have lost more than 60 per cent of their value since then.

The flurry of activity broadened from former darlings to newer companies that have taken the meme stock baton, such as BlackBerry and Trump Media & Technology Group. BLOOMBERG